The author is an analyst for Shinhan Securities. She can be reached at kimaram@shinhan.com -- Ed.
Gaining a solid fan base among NAVER Webtoon subscribers
YLAB, listed on the KOSDAQ in July this year, is a webtoon studio that has published popular titles like Island, Reawakened Man, Terror Man, Get Schooled, Reality Quest, and Study Group on NAVER Webtoon. YLAB sets itself apart from other content providers by hiring its own webtoon writers. This allows the company to retain rights to intellectual properties and licensing for the adaptations of original titles. It also has a subsidiary for in-house drama production. As of 2022, webtoon production accounts for 39% of sales, drama production 51%, webtoon education 3%, webtoon localization 7%, and webtoon OSMU (merchandise, royalty) 1%.
Expectations need to be lowered for 2023
YLAB is expected to see operating loss widen in 2023, with its cumulative loss for the first three quarters amounting to KRW2.5bn. Get Schooled has been temporarily suspended from service from September 16, and filming has just started for the webtoon-based drama Study Group. The company’s quarterly earnings tend to fluctuate, affected by the timing of new releases and their performance in the market as well as the timing of the sale of drama distribution rights. When it comes to drama production, the production costs are recognized as sales (low margin) as the production progresses and net sales excluding these costs (high margin) are booked at the time of sale.
Promising outlook for 2024
With the outlook brighter for 2024 vs. 2023, YLAB deserves our attention after the release of 4Q23 earnings results.
NAVER plans to go ahead with the IPO of NAVER Webtoon in 2024, according to media reports. YLAB is a significant supplier of webtoon titles for the platform among listed content providers. With the supply of shares rising after the post-IPO lock-up period expires, YLAB is highly likely to grab the investors’ attention alongside NAVER Webtoon.
Earnings are forecast to turn around in 2024. The resumption of Get Schooled and the release of Blue String Season 3 are slated for 1H24. Sales from webtoon production are expected to recover, and the webtoon-based drama Study Group should be aired on TVing in 2H24.
We focus on YLAB’s merits as a webtoon studio in the long-term perspective. Webtoons are increasingly made with contributions from many writers, who are creating their own fandom. The company’s large pool of talented webtoon writers with experience in producing popular titles will give YLAB greater leverage in terms of the rights to intellectual properties and licensing agreements.